May 1999
Volume 63 |
Number 5
|
| |
PRACTICE MANAGEMENT
|
| Employing Nurse
Anesthetists Part II: Cost/Revenue
Analysis |
Karin Bierstein,
Practice Management Coordinator
Will employing, or deploying, nurse anesthetists increase your
net revenue? That is the major consideration in deciding whether
to employ and how to use allied health personnel, although it
is not the only factor.
Shena J. Scott, MBA, CMPE, and Genie G. Blough, MBA, CMPE, demonstrated
how to analyze the economics of employing nurse anesthetists at
the February 1999 ASA Practice Management Conference. As summarized
in the "Practice Management" column in the April
issue of the NEWSLETTER, they also reported the results
of their survey of staffing practices and preferences. The model
that they propose for evaluating the net cost of employing a nurse
anesthetist is described below.
1.Information That You Will Need
Once you have decided that you need to add a nurse anesthetist
to your group, or that you may wish to allocate anesthesiologists
differently, you will need to know how much a nurse anesthetist
would cost and how much revenue he or she would generate. Personnel
costs consist of the following elements:
Cost of a Nurse Anesthetist
| Direct costs |
Indirect costs |
| Salary |
Vacation and sick days (coverage by another
provider) |
| Overtime |
Management/overhead |
| Benefits (pension; health, life and disability
insurance, malpractice insurance, continuing education, membership
dues) |
|
| Bonus |
|
| Payroll taxes, workers' comp |
|
While adding up the direct costs may be relatively straightforward,
calculating the indirect expenses involves assumptions, projections
and allocation decisions. In particular, you will have to choose
what portion of the practice's overhead should be attributed to
the nurse anesthetist. This determination could be as simple as
dividing the total overhead expenses by the total number of providers
in the group, or it could involve a more sophisticated breakdown
by type of provider, by compensation level, etc.
Revenue
Revenue depends on conversion factors as well as on payers'
methods of handling reimbursement for nurse anesthetists. Conversion
factors vary significantly from one payer to another and from
one region to another. Payers also differ in how they allocate
the fee between anesthesiologist and anesthetist. While many payers
do not differentiate between staffing models and simply remit
100 percent of the fee to the practice without regard to the involvement
of allied health personnel, Medicare and a growing number of commercial
carriers divide the payment between the medically directing anesthesiologist
and the nurse anesthetist. It is generally not feasible to staff
operating rooms according to payer, so the analysis will be based
on your own practice payer mix and on how your largest payers
handle nurse anesthetist reimbursement.
Productivity Index
To quantify the overall productivity of a facility and the efficiency
of using nurse anesthetists, it is important to measure anesthetist
productivity:
Case hours produced at Facility A ÷ Nurse
anesthetist hours worked (paid)
By tracking the time worked by each anesthetist at each facility
and comparing it with the billable hours produced by those anesthetists
at that facility, you can develop a daily productivity index.
This could also be translated into an individual nurse anesthetist
productivity index, but caution should be exercised in reading
too much into the result. Individual nurse anesthetists may have
no control over their utilization for cases. Facility tracking
will quantify the utilization of anesthesia personnel and could
include physicians as well when doing a cost analysis of the total
facility.
Below is an example of daily productivity measurement at a hypothetical
surgery center:
15 cases total (3 rooms, 1 hour per case)
2 anesthetists working each from 0630 until 1500 (8.5 hours
each)
1 nurse anesthetist working from 0630 until 1300 (6.5 hours)
1 physician
Total nurse anesthetist hours worked: 8.5 + 8.5 + 6.5 = 23.5
hours
(Note: If your nurse anesthetists are guaranteed 8 hours and
are not needed elsewhere when the 15 cases are finished, you must
add an additional 1.5 hours to the above.)
Total case hours produced: 15 hours
Productivity Index: 15 ÷ 23.5 = 63.83 percent
The productivity index indicates the proportion of hours worked
by anesthetists that were actually spent in case production. The
index can be tracked over time and used for benchmarking efficiencies
for specific days of the week; i.e., are Tuesdays busy with "on-time"
surgeons, healthy patients and quick room turnover? There are
numerous other potential uses in addition to calculating the economic
feasibility of employing nurse anesthetists.
2.Performing the Math
Staffing operating rooms using the care team model can be economically
advantageous. Whether it is or not, however, depends on the individual
practice. Ms. Blough and Ms. Scott offer a sample relative cost
index using data from the American Medical Group Association's
Compensation and Productivity Survey and the Medical Group
Management Association's (MGMA) Physician Compensation and
Production Survey. According to the former, the median compensation
in 1997 was $222,750 for an anesthesiologist and $88,561 for a
nurse anesthetist. The MGMA's 1997 data revealed median anesthesiologist
compensation of $240,000 and median anesthetist compensation of
$82,942. Taking the mean of the two statistics for each type of
provider and adding hypothetical benefit costs of $50,000 for
the physician and $25,000 for the nurse result in total costs
of $281,375 for the anesthesiologist and $110,751 for the nurse
anesthetist.
The cost of the nurse anesthetist in this example is thus 39.36
percent of the cost of the anesthesiologist. The cost index of
staffing using different medical direction ratios is then calculated
as follows:
3 rooms, 3 anesthesiologists
3 x 1.0 = 3.0
3:1 (3 rooms, 1 anesthesiologist, 3 nurse anesthetists)
(1 x 1.0) + (3 x .39) = 2.17
2:1 (2 rooms, 1 anesthesiologist, 2 nurse anesthetists)
(1 x 1.0) + (2 x .39) = 1.78
4:1 (4 rooms, 1 anesthesiologist, 4 nurse anesthetists)
(1 x 1.0) + (4 x .39) = 2.56
Thus, in this example, the relative cost of medically directing
on a 3:1 basis is 72.3 percent of the all-physician cost (2.17
÷ 3.0). The 2:1 ratio would cost 89 percent, and the 4:1
ratio would cost 64 percent. Ms. Scott and Ms. Blough caution,
however, that this analysis should really be performed on an hourly,
not a total cost, basis. If physicians typically work longer hours
than anesthetists, or vice versa, the use of an hourly comparison
can dramatically alter the results of this analysis. If, for example,
a physician in this practice works 60 hours per week, 46 weeks
per year (total of 2,760 hours) while the nurse anesthetist works
only an average of 42 hours per week, 46 weeks per year (a total
of 1,932), the anesthetist actually costs 56.22 percent of the
physician on an hourly basis. This changes the result of the computation
above such that it is more expensive to use nurse anesthetists
in the 2:1 setting and close enough in the 3:1 setting that including
noneconomic considerations might justify a different decision.
Thus, each practice must perform its own analysis using its own
data.
As Ms. Blough and Ms. Scott note, economic advantage is not
the only consideration in deciding to work in the care team mode.
Among the most important factors are patient safety in more complex
cases and the ability to devote adequate attention at the higher
medical direction ratios. Another issue is the sheer complexity
of billing for medical direction and the potential for Medicare
fraud and abuse liability. For many groups, however, working with
only anesthesiologists is simply not an option, by necessity or
choice. One advantage of working with anesthetists is that it
can free up the anesthesiologist(s) to supervise multiple cases
and be available to cover labor epidurals as well. This can be
a significant noneconomic benefit by lightening the call load
for physicians. In these instances, the question becomes whether
or not the physician group should employ the nurse anesthetists
itself, negotiate with the hospital to do so or encourage the
anesthetists to work as an independent group.
Assuming that the anesthesiologist has complied with the medical
direction requirements, a group that employs the anesthetist is
entitled to receive 100 percent of the Medicare allowable. A physician
group that does not employ the anesthetist is entitled to receive
only the physician 50 percent, with the other 50 percent going
to the nurse anesthetist or his or her employer. Thus, since the
anesthesiologist receives the physician portion in any event,
the true test of the economic advantage of nurse anesthetist employment
comes down to whether the cost of employing the anesthetist exceeds
the additional revenue realized as a result of that employment.
To compare revenue and cost, it is necessary to determine the
total cost of a nurse anesthetist per hour. To demonstrate this
calculation, assume that the anesthetist works 1,932 hours per
year. Using the $110,751 compensation figure developed above,
as well as an overhead allocation based on the 12.08 percent median
operating cost for anesthesiology practices listed in the 1998
MGMA Cost Survey, the base average hourly cost is as follows:
| Compensation package: |
$110,751 |
| Overhead allocation: |
$13,379(12.08 percent
x $110,751) |
Total cost:
|
$124,130
|
| Hours worked per year: |
÷ 1,932(46 weeks x 42 hours
per week) |
Hourly cost:
|
$64.25 |
| Productivity index: |
÷ 63.83%(see computation above) |
Facility-adjusted cost per billable hour:
|
$100.66
|
A typical case in the facility in this example might generate
5 base units and 6 time units (1.5 hours ÷ 15) for a total
of 11 units. The nurse anesthetist cost would total $150.99 for
the one-and-one-half hour case. If Medicare is the payer, and
the conversion factor is $16 per unit, you would lose money on
this case:
| Medicare allowable: |
$176.00 |
| Nurse anesthetist 50 percent: |
$ 88.00 |
| Cost: |
$150.99 |
| Net: |
($62.99) |
If commercial carriers allocate according to the Medicare formula
but at a higher rate, this situation still could be profitable
for the employer. What conversion factor is needed for this to
be true?
| Break-even conversion factor: |
$27.45 ($150.99 ÷ 11 units
x 2 [only 50 percent of allowable is allocated to the nurse
anesthetist]) |
If the conversion factor were greater than $27.45, employing
the nurse anesthetist would be economically advantageous. Similarly,
if the payer allocates a greater share than 50 percent to the
anesthetist, there may be a net profit.
The effect of the facility's productivity index is very important.
With greater efficiency and productivity, it may be possible to
generate a profit even with a low conversion factor. For example,
a heart procedure with a base of 20 units that lasts four hours
(16 time units) would generate a total allowable of $576 under
the assumptions used above. The nurse anesthetist's half of that
reimbursement would be $288. At this second hypothetical facility,
nurse anesthetists typically do two long cases per day. The schedule
is "to follow" and operating room turnover is highly efficient.
The nurse anesthetist works 7.5 hours of each 8 hours paid, creating
a productivity index of 93.75 percent and a nurse anesthetist
cost of $68.53 per billable hour. In this case, the group would
pay the nurse anesthetist $274.12 for those four hours, making
it a slight advantage for the group to employ the nurse anesthetist,
even at the Medicare conversion factor.
A practice with good information on its payer mix and the payers'
methods of reimbursing for nurse anesthetists' services, as well
as on the productivity of the facilities covered and on practice
costs, will be able to analyze the economic benefit of employing
nurse anesthetists. It is important to bear in mind the many noneconomic
factors, starting with control over quality and patient care.
Other factors are identified in Ms. Scott's and Ms. Blough's monograph,
published as part of the compendium from the 1999 Practice Management
Conference and available for $40 per copy from the ASA Publications
Department, (847) 825-5586.
Minnesota Anesthesiologists Prevail in False Claims
Lawsuit
The Minnesota federal district court has thrown out the Minnesota
Association of Nurse Anesthetists' (MANA) qui tam ("whistle
blower") lawsuit alleging on behalf of the federal government
that four Twin Cities hospitals and various anesthesiologists
had violated the False Claims Act.
The same judge earlier dismissed MANA's antitrust lawsuit against
the same defendants.
Although the major portion of the qui tam opinion dealt
with technical legal issues, perhaps the judge's most significant
conclusion was that the defendant anesthesiologists - rather than
filing false claims as alleged - had acted in accordance with
advice from Medicare and its carriers:
"[T]he record bears substantial evidence that Defendants billed
in accordance with the advice given them by the Government agents
- the Medicare carriers. ... The confusion on the part of nationwide
carriers, members of the anesthesiology and anesthetist professions,
and even the HCFA itself demonstrates the need for clarification
of the regulations."
This finding vindicated the position that had been maintained
by the defendant anesthesiologists in Minnesota since the very
inception of the lawsuit. It also suggests an appropriate avenue
for anesthesiologists in other states to explore if and when charged
with the filing of false Medicare claims, whether in a qui
tam case or otherwise.
In more technical terms, the nurse anesthetists' qui tam
proceeding also failed because the relevant federal statute prohibits
a court from asserting jurisdiction over a lawsuit based on public
disclosure of the underlying acts. Here, the underlying acts had
been well-publicized in the news media and had also been the basis
of the unsuccessful antitrust proceeding. The court refused to
allow the nurses' attempted bootstrapping, and stated:
"The philosophy behind the creation of the qui tam action
is to encourage an individual with personal knowledge of a public
danger to notify the public of the clandestine activities of
the offending party, without risk of exposure to economic peril
or other forms of retaliation. In the matter at hand, the qui
tam device is being used not to blow a whistle to save the public
from a dangerous practice, but rather as a tool in the marketplace
battle between anesthesiologists and nurse anesthetists in their
long-fought struggle over the allocation of health care dollars.
The design of a qui tam action is to create an incentive to
report fraud where traditionally there would be a disincentive
to the reporting. Here, Plaintiff begins its litigation armed
with a financial incentive from the outset. This qui tam suit
is being used as a sword to attack the actions of a competitor
rather than a shield to protect the interests of a vulnerable
individual."
The court also ruled that the Minnesota Association of Nurse
Anesthetists (MANA) lacked "standing" to pursue the False Claims
Act action. There was no injury to the Medicare program even if
the defendants' billings had been incorrect as alleged, since
the payment was the same; the argument was over the division rather
than the size of the pie.
A MANA appeal from the summary judgment order is likely, given
the ardor of the plaintiffs and the fact that they have previously
appealed the decision dismissing their antitrust case. In both
cases, the judge's opinions are well-reasoned and are supported
by numerous other federal court decisions, and it seems reasonable
to expect that both appeals will fail.
return to top
|